The current buzz words in the healthcare industry, ACO’s, bundled payments, global payments, Affordable Care Act, etc., will test the resiliency of hospital/physician relations like no other time in the past. Under today’s relentless pressure to reduce health care costs based on what seems to be the universally shared believe that our current system is unsustainable, change is as inevitable as ever.

 

The current discussion involving the creation of Accountable Care Organizations that would be positioned to accept a new payment system is quickly gaining acceptance and momentum by the majority of stakeholders. This trend, however, is similar to the development of “integrated delivery systems” of the early 90’s that for various reasons never really took off and proliferated. During this time, I was in Louisville, Kentucky involved with the development of an integrated delivery system for the largest non-profit system in the region. Specifically, I was responsible for the physician integration piece that was the most critical and challenging. After developing our plan and obtaining board approval, we set out to integrate with physicians by acquiring primary care practices that were geographically strategically located within our broad catchment area. We were successful and positioned ourselves to be prepared to take on risk through direct contracting with employers through a capitation payment system. For a number of reasons, reform in the payment system never came about. The development of this integrated delivery system and physician integration strategy tested our skills in physician relations as we transitioned to an employer/employee relationship with the acquired physicians even though the payment system remained the same. We were challenged, however, from a hospital/physician relations perspective, as we had to maintain a positive working relationship with our medical staff with the majority of physicians being independent practitioners. Those physicians who were acquired and now employed could not be given overt preferential treatment.

 

Will the current movement toward the development of ACO’s and global payments have the same fate as the integrated delivery systems of the 1990’s? I don’t think so as this time around there is too much at stake and the health care delivery system has been elevated to a top shelf priority due to overall rising costs magnified by the growing federal deficit. The topic remains in the mainstream of our political system where there are much higher expectations for reform and the consensus that the status quo is not a viable option.

 

By accepting the inevitability of health care reform with a primary goal of turning back the significant growth in costs, hospitals will continue to position themselves for change. The payment system will move away from the traditional fee-for-service system to bundled payments and require healthcare executives to sharpen their skills in physician relations. This acceptance of change is seen in the current trend of hospitals going out and buying physician practices at a pace more aggressive than in the 90’s. This could be beneficial under an ACO model with bundled payments as these newly employed physicians will be salaried and will not require sticky negotiations and agreements to divvy up global payments. With these physicians who are employed, healthcare executives will need to turn their attention to quality and outcomes that will provide incentives and enable hospitals and other healthcare organizations to offer bonuses based on quality and efficiency measures. What about the independent physicians and members of a hospital medical staff who are now part of the hospital’s ACO? A hospital will need to negotiate a process to split with these physicians’ bundled payments. This will be challenging as a hospital will elaborate on the high cost of staff and “bricks and mortar,” while the physician will take the position of “captain of the ship” responsible for execution and oversight of care and treatment. Even those hospitals and healthcare organizations with a long history of strong and positive physician relations based on trust will require a well thought out game plan. Physicians will not take well to ACO’s (hospitals) receiving these bundled payments and distributing a portion to them. Under this scenario with payment for services involved, trust goes out the window. There is a reason why Medicare did not include physicians when they implemented DRG’s in the mid 1980’s.